In my real world job I take a keen interest in commodity trading and management of the associated risks. Indeed, I used to call some of the training courses I ran, “How not to lose your shirt to Enron.” The current problems with credit derivatives, and spectacular trading disasters such as the recent one at Société Générale, are the sort of thing I used to teach people to guard against. Mostly the work I did was mathematical and procedural, but I’ve always been interested in other explanations as to why people take silly risks. One of the explanations that is gaining ground is that men get overcome by their hormones. In a high stress situation a good dose of testosterone turns out to be quite useful, but the worse things get, the more testosterone men pump out, and the less rational they become.
You know, we hear an awful lot about how women are unsuitable for management or public office because they are “too emotional”, but actually men get emotional too, and sometimes their emotional reactions can be really, really dangerous.
(This is also a very good reason for discouraging men from having business meetings in lap dancing clubs. It clouds their judgment.)
So does this mean you’re against people investing with Vince McMahon’s new brokerage staffed by ex-professional wrestlers?
Hmmph.
I, an ex series 3 licensed futures and commodities broker, have stories of teh dumb in action. Oy!
(I did leave the industry after less than a year. My ethical hangups were incompatible with brokerage standards.)
Lap dance lunches are just another form of smoke and mirrors to distract the less-sophisticated gullible from the important things.
One of the thing that the press forgets to realize though- which you I am sure never forget- is that as commodities markets crash, people are making billions on it.
Mike:
It depends on who they have to run the risk management department.
Daniel:
I’m sure we could trade stories. Including some about people who got lucky during a crash and who thought they were geniuses as a result. One of the interesting behavior traits of traders is that they all think that they are the sharks and everyone else in the business is prey.